Recent research and engagement with accounting professionals on ethics has consistently identified training and illustrative case studies as the preferred methods of support for increasing familiarisation with the Code of Ethics. 

Professional accountants have expressed a preference for real-life examples and case studies, which allow them to consider ethical dilemmas in a practical way, relevant to their own experience. The recent publication of five sets of Ethical Dilemmas Case Studies by the Consultative Committee of Accounting Bodies (CCAB), of which ICAEW, ACCA, CIPFA, ICAS and Chartered Accountants Ireland are all members, is a welcome response to this need.

The case studies, which are applicable in both UK and Ireland, illustrate how the Code of Ethics can be applied by members working in business, not-for-profits, the public sector, public practice, and as non-executive directors. Each set contains several case studies tailored to reflect ethical dilemmas that can arise in the course of their professional work. They are designed to outline key principles and processes that can be considered when attempting to identify, evaluate and address ethical threats in line with the Code of Ethics.

While more than one set of case studies may be relevant to an individual member, members in practice will appreciate the case studies exploring a range of ethical dilemmas tailored for professional accountants in public practice. This set explores the following ethical dilemmas:

Absences from work

The first case study explores the dilemma faced by a manager in relation to a very competent junior member of staff whose personal circumstances require her to take regular absences from work. This is having a negative impact on her colleagues, who are vocal about being overworked. Like other case studies in the set, it works through the dilemma in a structured manner, consistent with the conceptual framework outlined in the Code of Ethics.

Unrecorded cash sales

The second case study presents a dilemma faced by a partner in a three-partner firm. He discovers a client is not recording certain cash sales in their accounts. The case study examines the practical considerations, including how to communicate the issue with the client and possible actions to take if the client is not receptive to the news. The commentary includes an outline of a thought process that prioritises the reputation of the firm, the five fundamental principles of the Code of Ethics, and relevant laws and regulations, to decide on the best advice for the client. This case also highlights the importance of considering legal reporting obligations, particularly in relation to anti-money-laundering legislation and fraud.

Conflicting interests

Case study three tackles an ethical dilemma facing a sole practitioner who loses a local small business client (Company A) and is subsequently approached to help a local competitor of Company A (Company B) make an offer to buy their former client. This dilemma is compounded by the fact that Company A is struggling financially, but this is not common knowledge. Also, the sole practitioner is acting as an alternate/continuity provider for another local sole practitioner, who is convalescing after a medical treatment. Company B is a client of the other practitioner. This case is a good example of how there can be several dimensions to an ethical dilemma, and the benefits of having a structured process in addressing such issues.

Fiduciary duties

In case study four, an accountant is advising a medium-sized group on a range of improvements to its operations and systems. After identifying a range of issues and preparing a report estimating the costs, the accountant becomes aware that the director with whom they are liaising has significantly understated these in a separate report to the board. The director does not share the accountant’s report with the board. This case requires consideration of to whom the accountant owes their fiduciary duty, and how they might discharge their duties and effectively manage their professional relationship with the client.

Unrealistic expectations

The fifth case study outlines a scenario in which a trainee accountant in a firm has been tasked with completing some complicated work within a very tight deadline in the lead-up to them taking study leave. The trainee feels insufficiently experienced to complete the work alone and would need additional supervision to complete it to the required standard. Their manager

appears unable to offer the necessary support. While there are lessons to be learned for both parties, the case highlights that certain behaviour, which itself may be unethical, may give rise to further unethical behaviour directly impacting the quality of work for clients.

Going concern pressures

In case study six, a three-partner firm has a large audit client for which it also provides non-audit services. There are substantial fees outstanding from the client and significant going-concern issues arise. Several topics are explored in this case, including that the audit planning section was not appropriately reviewed, that key information was missed, and that there is pressure to provide the bank with a clean audit opinion so it can extend the company’s overdraft facility. This is a situation in which more than one set of ethical obligations requires consideration, in this case the Code of Ethics and the Ethical Standards for Auditors.

Legal compliance issues

Case study seven addresses suspected non-compliance with laws and regulations (NOCLAR), including bribery and cover-up of breaches of environmental laws and regulations, and considers any legal reporting obligations for the firm. The case highlights real issues that can arise, including dealing with pressure from clients to disregard any suspicions of non-compliance, desire to disassociate from illegal or unethical activity, deciding whether to override client confidentiality and report suspicions to the appropriate authorities, and balancing duties to the client with the public interest with safeguarding the reputation of the firm.

CCAB’s Ethical Dilemmas Case Studies provide an interesting and illuminating way to engage with the Code of Ethics while also increasing awareness of some threats to ethical conduct that can arise in an accountancy firm. Members are encouraged to use, read and apply them, and they can also be used by firms and/or training providers provided they are appropriately referenced. 

A version of this article originally appeared on charteredaccountants.ie

See also:

• Ethics essentials: sector-specific advice for accountants
• Pushing back against pressure to behave unethically